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Santam ‘making headway’ in settling business interruption claims

Around R1.7bn already paid out, but all eyes on its Ma-Afrika appeal.
The lion's share of the improvement in headline earnings per share can be attributed to premium growth. Image: Moneyweb

Santam is making headway in settling business interruption claims originating from the Covid-19 pandemic, outgoing CEO Lizé Lambrechts said on Thursday following the release of the group’s half-year results to end of June 2021.

“A lot of progress has been made,” she told Moneyweb, adding that large amounts are involved and some of the claims are complex.

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According to Lambrechts, as at the end of August 2021, Santam had paid approximately R700 million in policyholder claims in addition to the R1 billion paid in interim relief to end August 2020.

This brings total claims payments related to what Santam refers to as contingent business interruption (CBI) cover to R1.7 billion so far.

The biggest outstanding issue is Santam’s appeal against the Ma-Afrika judgment with respect to the length of the indemnity period for business interruption. The appeal was heard by the Supreme Court of Appeal (SCA) on August 27 and a decision is expected within a few weeks.


Ryan Woolley, CEO of Insurance Claims Africa (ICA), seems to agree that there is progress on this particular matter, although maybe not the progress that Santam would like to see as ICA is in the ring for Ma-Afrika.

“We had a good day in court on the 27th and we will get the outcome soon. Without trying to predict the outcome, comments seem to favour our position that the case has been made overly complex,” says Woolley.

ICA is southern Africa’s largest independent insurance claims expert working only for the insured party, formulating and negotiating the settlement of some the largest insurance claims in the country. It is currently representing over 700 claimants related to Covid-19 business interruption insurance claims against most of SA’s major short-term insurers.


Most of these claims will (hopefully) be covered by reinsurance. Santam might get the first recovery from its reinsurers with regards to the CBI claims within a few weeks.

Management mentions that good progress has been made in engaging with the participants on the reinsurance programme.

Santam is standing by the provisions it has put aside to settle the claims.

“In determining the appropriate level of provisions at end-June 2021, Santam has considered the underlying exposures, the court judgments, the pending judgment by the SCA with regards to the length of the indemnity period on specific Hospitality & Leisure (H&L) policies as well as the proportion of CBI claims which will aggregate as a single loss occurrence under Santam’s catastrophe reinsurance treaty,” explains management.

Santam CEO Lizé Lambrechts. Image: Supplied

No adjustments were made to the net CBI claim estimate of R2 billion as reported at December 31, 2020, other than to reduce it with the actual claim payments of R266 million up to June 30, 2021, according to the financial statements.

Santam is also actively working to settle claims originating from the recent unrest in KwaZulu-Natal and Gauteng on behalf of the SA Specialised Risk Insurance Association (Sasria).

Management notes that Santam has exposure to these claims as well through its subsidiary Santam Re, which reinsured part of Sasria’s book.

“It is too early to accurately quantify Santam’s net exposure relating to this participation until loss estimates are received,” says Lambrechts. “However, based on all treaty limits, it cannot exceed R315 million.”

Meanwhile, management notes that Santam is well-capitalised and returns have recovered.

The conventional insurance book achieved gross written premium growth of 5% (2% when excluding premium relief support to policyholders in 2020). Net earned premiums increased by 9% following the good growth achieved by Santam Specialist Business during the second half of 2020.

Santam achieved a net underwriting margin of 6.7% in the six months to end-June, compared to 4.3% in the first half of the 2020 financial year. This is above the midpoint of the group’s target range of 4-8%, indicating that things are getting back to normal.

Interim results

Source: Sanlam results announcement, JSE price data

However, net investment income took a knock due to volatile markets, as well as a strengthening currency. Inclusive of the investment return on insurance funds, returns amounted to R355 million compared to R582 million a year ago when the bourse was in a strong upward trend.

“The lower interest rate environment and the stronger rand exchange rate against most currencies were the key contributors to the weaker investment performance. Foreign currency losses of R121 million were recognised in 2021, compared to foreign currency gains of R647 million for the period ended 30 June 2020,” notes Lambrechts.

The cash flow statement shows that Santam is paying claims. Cash generated from operations decreased to R2 billion (R3.9 billion previously), mainly due to higher claim settlements during this period.

Headline earnings per share increased to R8.63 compared to R6.63 a year ago, with the income statement disclosing that the lion’s share of this improvement can be attributed to premium growth.

Of interest – and another sign that things are normalising – is that vehicle-related accident claims have also increased. Natural catastrophe claims were much lower than in previous years.

“Things are improving,” says Lambrechts.

“As far as premium income and claims go, Santam is just about back to normal. Operations are getting to the new normal of a hybrid working model of working from home and from the office.”


Lambrechts is cautious about being drawn in on the outlook for the next year or so, but is still optimistic.

“We are experiencing unprecedented uncertainty in the business world and extreme volatility in financial markets. The economy has shown some recovery, but off a very low base. As a company, we are ready to tackle the challenges,” she says.

It looks like shareholders expected somewhat better results.

On the JSE, Santam ended the day almost 1.4% lower at R246.79 per share.

However, the share price is solidly above its 12-month low of R220, albeit 28% lower than its peak in 2019, before Covid-19 lockdowns and business interruption claims became household words.

Perhaps the interim dividend of R4.32 will help to ease the pain, although an old Stock Exchange Handbook reveals that Santam paid a very good dividend of R9.52 less than five years ago.

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